Shareholders approve Lippo Bank's rights issue plan

Shareholders approve Lippo Bank's rights issue plan

JAKARTA (JP): Publicly listed Lippo Bank obtained shareholders
approval on Wednesday for a rights issue that will allow it to
raise Rp 4.7 trillion to finance its recapitalization program.

The bank said in a statement that some 17.1 billion new shares
with a par value of Rp 10 would be issued at Rp 275 each.

The government has required all of the country's commercial
banks to have a minimum 4 percent capital adequacy ratio (CAR) by
the end of this year.

Banks with a CAR level of between minus 25 percent and 4
percent are eligible to join the government bank recapitalization
program in which the government will provide up to 80 percent of
the recapitalization funding, while the bank must provide the
remaining 20 percent.

The CAR is the ratio between capital and risk-weighted assets.

Lippo did not say what its CAR level was.

"We see long term bright prospects for the Indonesian banking
industry," said president Eddy Sindoro, adding that the banking
sector was one of the key elements in the recovery of the crisis-
hit economy.

The bank said that its significantly increased capital would
strengthen its liquidity position and boost its net interest
margin and profitability.

Lippo Bank, which was established in 1948, claims to have more
than 2.4 million customers and 400 branch offices throughout the
country.

The bank said that the issuance of the new shares with a par
value of Rp 10 each, the first in the history of the country's
capital market, was meant to provide greater flexibility for the
bank in issuing new shares in the future without having first to
increase its capital base.

It pointed out that with a capital base of Rp 1.27 trillion,
the bank could issue some 127.15 billion new shares with a par
value of Rp 10, compared to a maximum of only 2.54 billion new
shares if using a par value of Rp 500.

"Such a flexibility is required in coping with economic and
market conditions which change rapidly," a representative from
Lippo Bank said. (rei)